Miami, Boston see highest hotel rate increases

Nov. 26, 2012
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Miami, Boston see highest hotel rate increases: Room demand in the USA is stronger than it has ever been. Case in point: In July of 2012 the hotel industry sold more room nights than ever before: 106 million. / Barbara DeLollis, USA TODAY

by Barbara Delollis, USA TODAY

by Barbara Delollis, USA TODAY

Will you be paying more or less for your hotel stays? Hotel analyst Jan Freitag of hotel industry tracker STR gives us an exclusive look at the rate landscape in some of the most popular U.S. markets, as hotels fill record numbers of rooms. The four cities with the biggest rate increases so far this year? San Francisco, Oahu, Boston and Miami.

Regular readers of Hotel Check-In will by now have picked up on a familiar theme: Room demand in the USA is stronger than it has ever been. Case in point: In July of 2012 the hotel industry sold more room nights than ever before: 106 million.

Rates rising in key cities

So despite macro-economic and political uncertainty one thing is clear; Americans are traveling, be it for business or pleasure. At the same time, lending for new hotel construction is scarce and therefore only very few new hotels are opening across the USA.

The strong demand numbers lead to higher occupancy levels, which in turn lead to what hoteliers refer to as "compression nights", i.e. nights where only very few rooms are available for sale. As with everything in economics, this supply/ demand imbalance then leads to increases in prices, or in our case, higher room rates.

Of course, there are still wide variances in hotel rate increases across the USA, as you can see on the table below.

The following table shows hotel occupancy and average daily rate in a variety of cities for the first nine months of the year.

Market

Percent occupancy through Sept. 2012

Average daily rate (ADR) through Sept. 2012

ADR percent change through Sept. 2012

New York

82.4

$237

2.4

Oahu Island, Hawaii

85.6

$182

11.9

San Francisco

81.5

$171

12.2

Miami

76.5

$163

6.7

Boston

73.6

$158

7.7

Washington, D.C.

69.8

$144

-0.7

Total United States

63.0

$106

4.2

Nashville

67.0

$97

3.9

St. Louis

62.7

$86

2.9

Atlanta

62.4

$85

2.8

Detroit

62.6

$79

3.1

In markets with the highest occupancy levels such as Miami and San Francisco hoteliers are reporting high absolute room rates and strong room rate growth. On the other side of the spectrum, markets that have vacancies of about four out of every 10 rooms every night are seeing lower average daily rates and lower room rate growth.

We expect this pattern to continue for at least the next six months as the lack of new room supply will impact pricing going forward.

* Miami. Miami has always benefited from the influx of both European and American leisure travelers and the winter season should be no different.

* Hawaii. New Asian airlines flying ever larger aircraft are making Hawaii a more affordable and accessible destination and our occupancy numbers reflect that trend. At the same, time cities with chronic oversupply of rooms are still relatively affordable.

* Atlanta. Atlanta is still digesting newly guest rooms that had been built over the last several years.

* Washington, D.C. The nation's capitol will eventually add more than 1,000 rooms with the Washington D.C. Marriott Marquis, which is under construction next to the convention center. It will be interesting to see the impact on room rates after that hotel opens.